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This session examined various State strategies for fostering the development of rural health networks. Paul FitzPatrick,
drawing from his experience as the former director of the New York State Office of Rural Health, reviewed both direct
technical assistance (TA) and policy support roles. Potential State TA roles include:

Developing/funding demonstration projects.

Publishing supporting information.

Developing communications and information-exchange capacities among the leaders of various networks, with a focus
on exporting local success stories.

Encouraging partnerships, involving both public and private sector stakeholders.

Noting that health care market forces are already driving rural providers to form networks and/or other kinds of more
integrated systems, Mr. FitzPatrick said that States can support network development by serving as facilitators and
information disseminators but cautioned against being too "directive." He said that State officials need to carefully
consider the special needs of rural areas as they reform/implement new regulations (e.g., rules for provider networks that
bear insurance risk) and to integrate rural network development activities into other State program initiatives (e.g.,
coordinate network demonstration projects with Medicaid managed care expansion efforts).

Jim Bernstein began his discussion of State roles and TA strategies by highlighting that economic poverty is a major
challenge to those trying to improve health care systems in rural areas, noting that in 50 of North Carolina's 100 counties,
40 percent or more of families earn incomes below 200 percent of the poverty line. All but three of these counties are
rural. These poor and near-poor families are more likely to be uninsured.

Illustrating that North Carolina's rural
communities still have a disproportionately low number of primary care practitioners compared with urban areas, Mr. Bernstein described how the North Carolina Office of Rural Health and Resource Development (ORHRD) has, over the past 25
years, established 74 State and federally supported primary care centers and worked to recruit more than 1,500 physicians,
nurse practitioners, and physician assistants to staff these clinics.

Noting that their work used to focus on individual communities, Mr. Bernstein said that he and his staff are now
increasingly involved with helping health care players from multiple communities to develop more integrated health care
systems. States have important roles to play in supporting the development of rural health networks by providing
leadership, financing, and continuous technical assistance, according to Bernstein.

Mr. Bernstein summarized the
philosophy of North Carolina's ORHRD as follows:

Strength of the State's program depends on recognition of the important roles of the local community and individual
leaders.

In developing "public/private partnerships," seek to foster mutual responsibility and accountability, and don't separate
program design from implementation.

The State needs to develop a credible relationship with communities, giving concrete assistance, not just "dangling
money."

Put your best people on the front line in the community developing projects, not supervising junior staff from behind a
desk in the capital.

Provide unfragmented, continuous technical assistance.

Stay focused on the objective: have "reality checks" and empower communities to make their own decisions.

The session also discussed various approaches States might take in implementing the new Medicare Rural Hospital
Flexibility program, which provides an alternative licensure category for limited-service facilities called Critical Access
Hospitals (CAHs) that must form networks.

Dan Campion reviewed the purpose, eligibility requirements,
reimbursement, service provisions, and network requirements of CAHs. The program seeks to preserve access to primary
care, emergency services, and a level of acute care services commensurate with local needs and available resources.
Eligible facilities must be licensed hospitals located more than a 35-mile drive from another hospital or other health care
facility, or certified by the State as being a "necessary provider of health care services to residents in the area." As part of
the process of designating facilities, States must develop a "State Rural Health Plan" in consultation with rural hospitals,
the State hospital association, and the State office of rural health.

Campion summarized some basic lessons for States from past limited-service rural hospital programs (e.g., the Essential
Access Community Hospital Program and the Montana Medical Assistance Facility Demonstration Program), as follows:

Technical assistance is integral to fostering limited-service hospitals and networks, as small facilities are often
financially and operationally unstable and need ongoing guidance.

Involving local physicians in decisionmaking processes is critical.

Developing a coherent approach for providing emergency medical services can be complicated, due to the patchwork of
public, private, and voluntary services, and variation in how CAHs decide to "make available" emergency services on
a 24-hour basis.

States vary widely in their approaches and capacities for creating State rural health plans.